Central bank policy making in competing payment systems
This paper analyzes the interaction between two payment systems. Administrators of both systems establish intraday credit interest fees, caps, and collateral requirements. Analysis of the model indicates that if a central bank does not take into account the effects that its policies have on its share of payment system transactions, then its efforts to contain risks associated with daylight overdrafts on its wire system will require a loss in its share of total transactions volume. If it does recognize the potential loss in its share of payments, then socially optimal policy instrument settings are unlikely to emerge. Copyright International Atlantic Economic Society 2000
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Volume (Year): 28 (2000)
Issue (Month): 2 (June)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kopecky, Kenneth J. & VanHoose, David, 2004. "Bank capital requirements and the monetary transmission mechanism," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 443-464, September.
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- Douglas D. Evanoff, 1988. "Daylight overdrafts: rationale and risks," Economic Perspectives, Federal Reserve Bank of Chicago, issue May, pages 18-29.
- Craig Furfine, 1999. "Interbank exposures: quantifying the risk of contagion," Proceedings 633, Federal Reserve Bank of Chicago.
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- R. Alton Gilbert, 1989. "Payments system risk: what is it and what will happen if we try to reduce it?," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 3-17.
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